on Aug 12, 2021)There is a mixed reaction to the move by the Reserve Bank of India (RBI) to penalise banks Rs 10,000 for each instance of an ATM being out of cash for 10 hours. ATM operators (known in the industry as managed service providers, or MSPs) and cash-in-transit companies are throwing up their hands, stating that they will not bear the penalty.
In a circular to banks this week, the RBI said that they should monitor the availability of cash in ATMs and ensure that there are no cash-outs. The circular said that banks would be fined Rs 10,000 if there is a cash-out at any ATM for more than 10 hours in a month.
“There are certain locations where ATMs run out of cash within hours of being loaded. These machines may not become feasible to operate if there is a penalty every month,” said a senior executive in an MSP firm. There are 2,13,766 ATMs in the country, and most of them are managed by MSPs who appoint cash-in-transit companies to replenish the currency notes in the machines.
According to MSPs, the regulations are well-intentioned as they recognise the role of cash in the economy and put the onus on banks to ensure cash availability. However, they say that the penalty is not well thought out because banks outsource most of the work and treat the regulations as something to be passed through to the MSPs.
“While the intent behind this RBI circular is welcome, penalty approach alone is unlikely to resolve the issue of ATM currency outage. In fact, it is quite likely that this penalty will become a pass-through, from banks to MSPs, and from MSPs to cash logistics agencies,” said Rituraj Sinha, group managing director at SIS, the largest security and cash-in-transit company in India.
According to Sinha, what needs to be addressed is the root causes of ATMs running dry, such as sub-optimal cash forecasting and delays in availability of ATM-fit currency.
“On-ground implementation of the RBI circular dated April 2018 is the real solution, not just before better security but also more accurate cash forecasting and on-time availability of currency to enable cash logistics agencies to upload ATMs on time and with an adequate amount of currency,” he said.
The 2018 circular requires banks to put in place stringent measures such as transporting cash in cassettes, in prescribed vehicles sticking to government norms on the transport of currency during specified hours of the day.
According to banks, it is difficult to implement all these norms under present cost structures.
